Jane's Teddy Bears from Manchester are selling stuffed toys all around the world. At the moment, the market in Brazil is expanding and Jane is producing teddy bears as fast as she can to meet demands. The reason for the success is that Jane have launched a product line with teddy bears themed after football teams, and even individual players, something that really resonates with the Brazilian market.
Jane is now in the process of shipping 35 pallets of products in time for the national football playoffs. Each pallet contains 90 teddy bears. Each bear is packaged in a box with the dimensions 20 x 25 x 35 cm and each box weighs 450 grams.
An empty pallet weighs 23 kg. A 20 ft container loads 12 pallets. A 40 ft container loads 25 pallets.
Jane has two main options, lease containers or let a forwarder handle the entire transport.
| 20ft container | 40ft container |
| Capacity, pallets |
12 |
25 |
| Rent, $ |
200 |
300 |
| Transport port-port, $ |
600 |
800 |
| Haulage (both ends), $ |
50 |
70 |
If a forwarder manages the transport, Jane pays $155 per tonne (1 tonne = 1000 kg). However, the forwarder applies a cutoff density at 270 kg/m3, meaning that goods below that density pays as if they weighed 270 kg/m3.
What should Jane do? What is the best alternative?
• Lease 3 x 20ft containers?
• Lease 2 x 40ft containers?
• Lease 1 x 20ft + 1 x 40ft containers?
• Use forwarder?
Calculate the combined transport cost for the different alternatives?